Economics Preparation


Two workers, X and Y, are roofers working on the same wage for the same firm. X earns more economic rent than Y. Which of the following statements is false?

A. X has lower transfer earnings than Y.

B. Because Y is earning some economic rent, the firm which hires Y could reduce the wage and Y would continue to work for that firm.

C. If the wage for roofers generally fell enough to persuade Y to take up another occupation, X might continue to be a roofer.

D. If we add up X's economic rent and transfer earnings, we would get the same figure we would get if we add up Y's economic rent and transfer earnings.


Which of the following statements is the correct definition of market failure?

A. It means that a market economy will fail to secure economic efficiency.

B. It means that a market economy will fail to secure Pareto-efficiency.

C. It means that a market economy will fail to secure productive efficiency.

D. It means that a market economy will fail to secure technical efficiency.


Which of the following statements is false?

A. Even in the worst recorded cases of hyperinflation, the price level always took at last a week to double.

B. Some people lose out if actual inflation turns out to be below the rate they expected.

C. Some people lose out if actual inflation turns out to be above the rate they expected.

D. Some people lose out if actual inflation turns out to be equal the rate they expected.


A profit-maximizing perfect competitor is in short-run equilibrium with an output of 100 per day. Which of the following events would not cause it to alter its output in the short-run?

A. A change in the demand for the product it makes.

B. A change in the number of other firms in its industry.

C. A change in the price of a fixed input.

D. A change in the price of a variable input.


To see whether a firm is making an economic profit, which of he following should be deducted from its revenue?

A. Its explicit costs only.

B. Its explicit costs plus depreciation.

C. Its implicit costs only.

D. Its explicit costs and its implicit costs.


Suppose a demand curve runs from the price axis to the quantity axis in a straight line. Whereabouts will PED=-1.0?

A. Where the curve meets the price axis.

B. Everywhere along the curve.

C. At the mid-point of the curve.

D. Nowhere along the curve.


Expenditure in an economy for one quarter of a year is as follows, all figures being at market prices and in £ billion: Consumption expenditure by households 80, consumption expenditure by non-profit institutions 5, consumption expenditure by general government 35, gross domestic fixed capital formation 20, changes in inventories 6, acquisition less disposals of valuables 1, exports 40, imports 45. What is GDP at market prices for that quarter?

A. £140 billion

B. £142 billion

C. £240 billion

D. £242 billion


Which of the following statements about trade unions is false?

A. They have many roles in addition to negotiating wages.

B. If they negotiate a higher wage in a competitive labour market, they will result in employers wanting to hire less labour.

C. If they negotiate a higher wage with a monopsonistic employer, they will always make the employer want less labour.

D. They may attempt to alter the demand curve for labour.


A consumer plots an indifference map between two products A and B, and marks in points to show the combinations of A and B that the consumer would buy if the price of A changed but the price of B remained the same. The consumer then plots a line through these points. Which of the following is this curve called?

A. A budget line.

B. A demand curve.

C. A price consumption curve.

D. An indifference curve.


Which of the following statements about the market demand curve for a product is false?

A. The market demand curve represents the individual demand curves of all consumers added together.

B. The market demand curve may shift if there is a change in the behaviour of some households which consume the product.

C. The market demand curve may shift if there is change in the price of the product.

D. The market demand curve may shift if there is a change in the number of consumers who buy the product.